Dicaprio falls asleep on the beach and then what takes place from there on out is all a dream he has.

The beach is real, in reality he is on vacation with his family taking a nap.

Look at some of the things that happen, the machine itself is very dream like and not very logical. Some ropes come out of a central location and attach to your wrists and there is a big red button in the middle, you push it and boom you're asleep. Dream logic. None of that would ever be logical in the real world, and the lack of the explanation only serves to confirm this. Leo's mind, who is making up this whole story as he sleeps, has no explanation.

There are other moments that seem to be "dream logic", logic we experience in a dream that we accept as fact, including the buildings closing in on Leo as he runs from the goons, and then suddenly being saved by Saito. (WHo hasn't had this sort of moment in a dream?) Saito himself has been tailing Leo? Why? Seems sort of convenient no? And how did he just happen to be in that right spot?

Also dream logic, indicates that the plot holes that are blatantly obvious become less damning in a dream world.

As someone like myself who is fascinated with lucid dreaming, this makes this movie all the more interesting to me. And the dream like, sort of fuzzy state at the end of the film is an indication that Leo is about to wake up on the beach.

Here is also an article backing up the theory that the whole movie is a dream and in a way Nolan uses it to make a movie about making a movie....